EU slowdown worsens GDP outlook
Overview:
The Czech economy continues to grow solidly with few macroeconomic imbalances: the current account deficit is low; the fiscal deficit is falling; and inflation is projected to stay within the targeted range. Despite these strong fundamentals, the fact that the economy is highly integrated with Europe will see growth slow significantly given the problems emanating from the latter. GDP growth has already softened over the last couple of quarters and this process is likely to continue. A general rise in risk aversion has led to a sell-off in emerging market currencies. The koruna has softened too but rather less than most of its peers. The coalition government continues to be plagued by internal tensions. However, it is still succeeding in tightening fiscal policy and implementing important structural reforms.